Unveiling the reforms

The call from the Ministry of Justice (MoJ) came at the last minute on Monday morning.

Will the press pack please assemble at the Government offices for a lock-down press conference later that day, the memo said. The Justice Secretary Ken Clarke has an announcement to make.

We arrived and were ushered into a back office. The press officer handed us two weighty tomes outlining how the ConDems want to radically overhaul legal aid and civil litigation funding.

The cuts to legal aid have gone much further than anyone had predicted, with £350m in savings to be made by 2014-15. Effectively, the Government aims to drive down the number of cases the public funds by 500,000 by the end of the parliamentary term. This means 264,000 family cases, 40,000 housing cases, 14,000 employment case and 6,400 clinical negligence claims will be carved out of the system.

“It cannot be right that the taxpayer is footing the bill for unnecessary court cases which would never have even reached the courtroom door, were it not for the fact that somebody else was paying,” Clarke told MPs in the House of Commons on Monday.

Unveiling the reforms to the press pack, Justice Minister Jonathan Djanogly said the public sector legal cuts would have a direct impact on the private sector. This is why the MoJ launched the legal aid consultation in tandem with its consultation on Lord Justice Jackson’s review into litigation costs.

There will be a raft of people on low incomes who are no longer eligible for legal aid and will, consequently, be pushed into the private sector. Some might think this means boom time for lawyers, but in reality profit margins have already been driven down in the high volume legal market.

Yet the Government says it is handing litigators the tools to be flexible on funding models and find new ways of making money. This will provide access to justice, it claims.

The MoJ’s consultation on Jackson LJ’s proposals has been almost 12 months in the making, but its outcome will be seen as radical.

“It’s a shift back in time,” said one partner. “The rolling back of the Labour years and the undoing of the Woolf reforms.”

Under the proposals, contingency fees are to be introduced but capped at maximum of 25 per cent with damages increasing by 10 per cent.

Meanwhile, Djanogly announced that recoverability of success fees and after-the-event legal expenses will be scrapped in conditional fee agreements (CFAs). There will be greater emphasis on the before-the-event market with the Government proposing that litigants self-insure for legal risk in advance. Qualified costs shifting, where losing claimants are only ever liable to pay their own legal costs, is also likely to be introduced. As expected the news has divided the market.

The president of the Forum of Insurance Lawyers (Foil) Dan Cutts welcomed the move.

“Disproportionate costs impede and distort the justice process,” says Cutts. “The procedure for the delivery of personal injury compensation should be trusted, quick and cost effective. This consultation is a step on the way to achieving this.”

But claimant lawyers argue that the proposals go to far. Susan Brown, director at claimant volume firm Prolegal, says, “the proposals announced yesterday follow on from Lord Jackson’s recommendations, which themselves were based on unverified data provided by insurers.”

In the City lawyers are still digesting the outcome, but Addleshaw Goddard head of litigation Richard Leedham claimed that with contingency fees coming in the more sophisticated clients will ask for alternative litigation funding.

“It’s all part of developing the services what we can offer,” adds Leedham.

But, he warned, it is inevitable there will be satellite litigation about how the reforms should operate through the courts.

“There will be all sorts of litigation about what is recoverable, but we are in the position we are now because of the disputes around the personal injury system,” Leedham says..

Legal costs have been the running theme of 2010 and, thanks to the MoJ reforms, this is likely to continue into 2011.

Lord Justice Jackson’s review of litigation costs has two interrelated, but distinct strands. Firstly, he makes recommendations which are aimed at reducing the cost of the litigation process overall. Secondly, he makes recommendations which are aimed at shifting the burden of what costs remain from one place to another.

The first strand (reducing costs overall) is in the interests of both claimants and defendants, and Lord Justice Jackson’s recommendations should be welcomed by everyone involved in the dispute resolution process. However, Lord Justice Jackson’s approach to the second strand (shifting the burden of what costs remain) is, in our view, of real concern.

At present, the cost of litigation is borne primarily by defendants whose actions have caused others (successful claimants) to suffer loss. Many of Lord Justice Jackson’s recommendations will, if implemented in their current form, have the effect of shifting the costs burden from (unsuccessful) defendants to (successful) claimants.

The difficulty with this approach is that many defendants (employers, professional advisers, property owners etc) are able to spread the cost of any claims which they may face by insuring against them. In this respect, the defendants “stand together”. Claimants, on the other hand, “stand alone”, as we do not, in this country, have a viable market for allowing potential claimants (i.e. all members of the public) to insure against the risk of suffering a loss due to someone else’s actions, and having to incur the cost of pursuing a claim. As a result, whereas defendants are, in many cases, able to spread the cost of becoming involved in a dispute, claimants are unable to do so.

Unless commercially appropriate ”before the event” insurance becomes widely available, the only way to spread the costs of the litigation process in a way that is financially manageable for those involved, is for those costs to be borne primarily by those who are able to stand together, as opposed to those who necessarily stand alone.

For these reasons, it is our view that the recommendations from the Jackson report which are aimed at shifting costs from one place to another are socially undesirable, and should be opposed.

We are a family disputing a claim or £12,000 against the claimant who has a CFA he has the largest firm of solicitors in our area representing him, the costs are extortionate, we no way out, we are of low income and we are looking at loosing our home & all that we have if we loose at court with costs & possible success fees, we are looking to loose £200,000 – £250,000 is this justice? It is who is better at playing the game and we have found that although we have purchased a defective product but the claimant solicitor is much better at the game of legalities than ours sadly, justice is not being done, the winner will be who is cleverer. We can do nothing as we are trapped in a situation we never invited or want to be in. Who protects people like us? Success Fees are destructive. We have solcitors in our area whose only work is with No Win No Fee and they are very wealthy companies!